Detached homes hit by inheritance tax

Owners of detached homes are more likely to be hit with an inheritance bill, a new report suggests.

Figures from Halifax show that owners of detached properties are more than twice as likely to be hit with inheritance tax bills now than they were in 2001, with 29 per cent of detached homes selling for sums higher than the threshold for the tax.

Inheritance tax is currently charged at 40 per cent of the value of all assets passed on above the £275,000 threshold, although this is set to increase to £285,000 in April.

Halifax calculates that the inheritance tax threshold would be £425,000 if it had been increased in line with house prices over the last ten years. In this time house prices have risen 176 per cent while the lower threshold for inheritance tax has risen just 85 per cent.

Homeowners in London are worst affected, with 82 per cent of detached homes and 44 per cent of semi-detached homes sold for more than the inheritance tax threshold last year.

"The inheritance tax threshold has failed to keep pace with the growth in house prices over the past ten years. Many more detached properties are now caught in the inheritance tax net," said Tim Crawford, Halifax group economist.

"We call on the government to index the inheritance tax threshold for the increase in house prices in the past ten years, which would bring it to £425,000 and to link the inheritance tax threshold to house prices in the future."